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An assessment of the Iberian Exception to control electricity prices

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  • Pedro Linares
  • Tom?s G?mez San Rom?n

Abstract

The Iberian Exception, the mechanism designed by the Spanish and Portuguese governments to address high electricity prices resulting from the gas price crisis in 2021 and 2022, has been met with controversy, both regarding its real impact on electricity prices and also its unin- tended consequences, such as increased (and subsidized) exports to France. In this paper we review the evidence on these impacts from different studies, concluding that the mechanism may have produced, depending on the assumptions, some reductions in electricity prices for Iberian consumers or none at all, but always at the expense of subsidies to French consumers and also increased rents for gas combined cycles, higher gas consumption, and larger CO2 emissions. Alternative mechanisms, such as a temporary single-buyer scheme, might have produced similar benefits without the downsides of the Exception.

Suggested Citation

  • Pedro Linares & Tom?s G?mez San Rom?n, 2023. "An assessment of the Iberian Exception to control electricity prices," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2023(1), pages 5-16.
    • Handle: RePEc:fan:efeefe:v:html10.3280/efe2023-001001
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    References listed on IDEAS

    as
    1. Neuhoff, K., 2022. "Defining gas price limits and gas saving targets for a large-scale gas supply interruption," Cambridge Working Papers in Economics 2253, Faculty of Economics, University of Cambridge.
    2. David Robinson & Angel Arcos-Vargas & Micheael Tennican & Fernando N'u~nez, 2023. "The Iberian Exception: An overview of its effects over its first 100 days," Papers 2309.02608, arXiv.org, revised Sep 2023.
    3. Karsten Neuhoff, 2022. "Defining Gas Price Limits and Gas Saving Targets for a Large-scale Gas Supply Interruption: Final Report," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 127, number pbk180, April.
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    More about this item

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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